Amazon Plans On Spending $120 Billion On Third-Party Supplies And Services In 2021

By Patrick Moorhead - September 2, 2021
Amazon worker AMAZON

I have followed Amazon very closely in recent years, and I have watched the company grow, hire, and rapidly expand its products and services. Many of Amazon's critics like to focus on Amazon's growth during the pandemic, but rarely do we hear about all the downstream capital reinvested into the United States economy. Much of the money flows to small to medium business owners who sell their products on, authors who sell books on Kindle Direct Publishing (KDP), or other companies hired to build infrastructure for Amazon's facilities. I wrote about Amazon's impact on SMB's last month, and you can access that here.

It's no shock that Amazon is one of the most prominent investors in the American economy and has been near the top of the Progressive Poly Institute (PPI) largest investors list for the last few years. I wrote about Amazon claiming the top spot as 2021s biggest investor in the American economy, and you can access that here. Often, I see criticism from the media and consumers about Amazon's growth. It is easy to look at a narrow set of metrics like stock price, revenue growth, or profit and spin a narrative that there is something fundamentally wrong with the company because of its success. While no company is perfect, including Amazon, there is plenty of good to look at when it comes to Amazon—especially considering the leadership position that the company took to support other businesses during the pandemic. Let's dig into the details of Amazon's investment within the United States and what it means. 

Capital spending 

The breadth of products and services that Amazon must consume annually to operate is vast. The company spends billions each year on office supplies, construction, engineering projects, logistics, and much more. This year is no different as Amazon plans to spend over $120 Billion on supplies and services purchased from other United States businesses. This spending represents a 20% increase year over year, which is expected based on Amazon's demand ramp throughout the pandemic. There are over 200,000 different businesses that these supplies will come from in a variety of industries. 

The spending doesn't include things like Amazon employee salaries; instead, it is spent solely on supplies from external, third-party businesses. I think this is important to point out because the more capital Amazon spends on supplies and services from third-party companies, the more employees those businesses will hire to support the uptick in demand. Over 100,000 small businesses in the United States closed for good during the pandemic, so this spending from Amazon could mean sinking or swimming for some small businesses. Amazon is ramping up its SMB spending and programs as of late. I wrote about Amazon's $18 Billion investment into SMB infrastructure here.

It's not necessarily a surprise that Amazon grew its spending massively as the company grew exponentially. To expand products and services and hire new employees, OPEX will grow. Although this increased spending allows the company to make more money, it also affects lives and provides steady jobs when people need them the most. 

Job creation 

Another key metrics that feels a lot more human than focusing solely on capital is job creation. Pumping large sums of money into the United States economy is excellent, but what impact does it make on American lives? Let's dig into some of the employment numbers. Throughout 2020, Amazon hired over 400,000 employees while many Fortune 500 companies instituted hiring freezes and layoffs. SMBs selling products on Amazon have also created more than 1.1 million jobs that aren't Amazon-owned. Amazon also cited Keystone Economics who estimated another 840,000 jobs created as a ripple effect from Amazon's spending. I will also point out that Amazon pays all full-time employees a starting wage of $15.00 an hour. Keep in mind that the federal minimum wage still sits at $7.25 an hour. These full-time employees also have access to free skills training that helps foster and develop new skills to land a higher-paying position within Amazon. 

When I think about Amazon's success, I think about the company's impact across the United States. Like any publicly traded company, Amazon focuses on driving shareholder value and increasing revenue and profits. But at the end of the day, there will be millions of lives positively affected in the process. 

Wrapping up 

After diving deep into the data, there is no doubt that Amazon is the most significant economic investor in the United States. Of course, the Amazon haters will always say that companies like Amazon shouldn't profit from a pandemic. While the ongoing pandemic helped accelerate Amazon's business, Amazon's ability to provide superior products and services in a time of extreme need is what allowed it to win. 

It's easy to cast stones at big corporations with rising profits and its not often that we take a moment to pause and look at all the good things that come as a result. Amazon isn't perfect, and I am not here to examine the motives behind business decisions. But I know that hundreds of thousands of employees, businesses, and authors made it through the pandemic because of Amazon's spending in 2020. I don't see Amazon slowing down its spending anytime soon. As we continue to see revenue growth and products and services expand, I challenge you to think of the ripple effect that Amazon's spending makes within the United States economy.

Patrick Moorhead
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Patrick founded the firm based on his real-world world technology experiences with the understanding of what he wasn’t getting from analysts and consultants. Ten years later, Patrick is ranked #1 among technology industry analysts in terms of “power” (ARInsights)  in “press citations” (Apollo Research). Moorhead is a contributor at Forbes and frequently appears on CNBC. He is a broad-based analyst covering a wide variety of topics including the cloud, enterprise SaaS, collaboration, client computing, and semiconductors. He has 30 years of experience including 15 years of executive experience at high tech companies (NCR, AT&T, Compaq, now HP, and AMD) leading strategy, product management, product marketing, and corporate marketing, including three industry board appointments.